Backtesting

Report

Introduction

Reports provide a summary of your algorithm's performance. They outline key statistics, returns, and performance during various market crises. You can generate a performance report after your backtest completes and download the report as a PDF.

Key Statistics

The top of the backtest report displays statistics to summarize your algorithm's performance. The following table describes the key statistics in the report:

StatisticDescription
TurnoverThe percentage of the algorithm's portfolio that was replaced in a given year.
CAGRThe annual percentage return that would be required to grow a portfolio from its starting value to its ending value.
MarketsThe asset classes that the algorithm trades.
Trades per dayThe total number of trades during the backtest divided by the number of days in the backtest. Trades per day is an approximation of the algorithm's trading frequency.
DrawdownThe largest peak to trough decline in an algorithm's equity curve.
PSRThe probability that the estimated Sharpe ratio of an algorithm is greater than a benchmark (1).
Sharpe RatioA measure of the risk-adjusted return, developed by William Sharpe.
Information RatioThe amount of excess return from the risk-free rate per unit of systematic risk.
Strategy CapacityThe maximum amount of money an algorithm can trade before its performance degrades from market impact.

Returns

The backtest report displays charts to show the algorithm's returns per trade, per day, per month, per year, and the cumulative returns over the backtest.

Returns per Trade

This chart displays a histogram that shows the distribution of returns per trade over the backtesting period.

Daily Returns

This chart displays the returns of each day. Blue bars represent profitable days and gray bars represent unprofitable days.

Monthly Returns

This chart displays the return of each month. We convert the original equity curve series into a monthly series and calculate the returns of each month. Green cells represent months with a positive return and red cells represent months with a negative return. Months that have a greater magnitude of returns are represented with darker cells. Yellow cells represent months with a relatively small gain or loss. White rectangles represent months that are not included in the backtest period. The values in the cells are percentages.

Annual Returns

This chart displays the return of each year. We calculate the total return within each year and represent each year with a blue bar. The red dotted line represents the average of the annual returns.

Cumulative Returns

This chart displays the cumulative returns of your algorithm. The blue line represents your algorithm and the gray line represents the benchmark.

Asset Allocation

This chart displays a time-weighted average of the absolute holdings value for each asset that entered your portfolio during the backtest. When an asset has a percentage that is too small to be shown in the pie chart, it is incorporated into an "Others" category.

Drawdown

This chart displays the peak-to-trough drawdown of your portfolio's equity throughout the backtest period. The drawdown of each day is defined as the percentage loss since the maximum equity value before the current day. The drawdowns are calculated based on daily data. The top 5 drawdown periods are marked in the chart with different colors.

Rolling Statistics

The backtest report displays time series for your portfolio's rolling beta and Sharpe ratio.

Rolling Portfolio Beta

This chart displays the rolling portfolio beta over trailing 6 and 12 month periods. The light blue line represents the 6 month period and the dark blue line represents the 12 month period.

Rolling Sharpe Ratio

This chart displays the rolling portfolio Sharpe ratio over a trailing 6 month period.

Exposure

The backtest report displays time series for your portfolio's overall leverage and your portfolio's long-short exposure by asset class.

Leverage

This chart displays your algorithm's utilization of leverage over time.

Long-Short Exposure By Asset Class

This chart displays your algorithm's long-short exposure by asset class over time.

Crisis Events

This set of charts displays the cumulative returns of your algorithm and the benchmark during various historical periods. The blue line represents the cumulative returns of your algorithm and the grey line represents the cumulative return of the benchmark. The report only contains the crisis event that occurred during your algorithm's backtest period. The following table shows the crisis events that may be included in your backtest report:

Crisis NameStart DateEnd Date
DotCom Bubble 20002/26/20009/10/2000
September 11, 20019/5/200110/10/2001
U.S. Housing Bubble 20031/1/2003
2/20/2003
Global Financial Crisis 200710/1/2007
12/1/2011
Flash Crash 20105/1/2010
5/22/2010
Fukushima Meltdown 20113/1/2011
4/22/2011
U.S. Credit Downgrade 20118/5/2011
9/1/2011
ECB IR Event 20129/5/2012
10/12/2012
European Debt Crisis 201410/1/2014
10/29/2014
Market Sell-Off 20158/10/2015
10/10/2015
Recovery 2010-20121/1/2010
10/1/2012
New Normal 2014-20191/1/2014
1/1/2019
COVID-19 Pandemic 20202/10/2020
9/20/2020

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